European stocks slide on Greek austerity discord

Bloomberg

European stocks fell from a six month-high this past week, as Greece’s coalition government failed to agree on the remaining spending cuts needed to obtain financial aid from the EU and stave off a default.

The STOXX Europe 600 Index fell 1.3 percent to 261.24 this week, retreating from its highest level since July 29. The benchmark measure has still rallied 22 percent from its two-year low on Sept. 22 and 6.8 percent from the start of this year as the European Central Bank (ECB) lent 489 billion euros (US$645 billion) to banks and investors speculated that the currency area would contain its sovereign-debt crisis.

European stocks dropped 0.9 percent on Friday as George Karatzaferis, who heads one of the three parties supporting Greek Prime Minister Lucas Papademos’ government, said he would not vote for the austerity measures needed to get additional rescue funds from the EU.

Fifteen of the 19 industry groups in the STOXX 600 declined this past week, with mining companies dropping the most. The IMF said the euro area’s debt crisis would cut China’s economic expansion almost in half if it worsens. Based on the IMF’s “downside” forecast for the global economy, China’s growth would drop by as much as 4 percentage points from the fund’s current projection for an expansion of 8.2 percent this year, the organization said in a report released by its China office in Beijing on Monday last week.